Strategic Group Analysis – Porter (1980)
Using this model, we can analyse the global car industry by using factors that effect an overall strategies of a company such as distribution, quality of goods and services, expenses, R&D and market segments to identify which companies compete in similar strategic groups.
Price against Quality and Reliability of brands are important factors in the car industry, since automobiles are generally high involvement products consumers will want a high level of quality and reliability and the best price. In the model above you can a concentration of companies in mid and high range areas of the axis, the middle group consists of brands such as Ford, Nissan, GM and Toyota who are major firms in this industry, this group is concentrated with small number of huge firms which suggest they are competing on a price based strategy, relatively low risk production and low gains associates less power of firms to be in a position to set prices. Unlike medium and high level brands competing in groups above these, high premium brands category topping price and quality and reliability. This structure of groups suggest that the higher quality and reliability of car brings the added price tag, for example cars such as Ferrari and Lamborghini invest huge amounts in R&D and their products to give high value added benefits, Implicating high risk and high gains strategy therefore being able to set prices higher. Gap 2 in the industry is the need for high quality, reliability car at lower prices, Skoda have an opportunity to push into this market as their brand and quality of product is quite high however cost implications, R&D or Skill may be acting as entry barriers into it. However they would increase competition and threaten to undercut middle market and upper market with better quality of car but at a lower price.
This model puts average price of cars and average production levels...